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Contents

Passage History

Higher Education Legislation
Amendment Bill (No.1) 1998

Date Introduced: 1 July
1998

House: House of Representatives

Portfolio: Employment, Education, Training and Youth Affairs

Commencement: Royal
Assent

Purpose

To make amendments to the Higher Education Funding Act 1988

â¢ to vary the
maximum amounts of grant that can be made to higher education institutions
under a range of grant categories: and

â¢ to enable the
Minister to determine the maximum amounts p ayable by the Commonwealth
to promote Australian education and training services overseas.

Background

The higher education system is funded on a calendar year basis under
the provisions of the Higher Education Funding Act 1988 . Funding is provided
on a rolling triennium basis, which means that the level of funding
is known for the next three years. This provides greater certainty
to institutions and enables better forward planning. Although
some see triennial funding as a strength of the current system, others
argue that in future it is likely to act more to insulate universities
from student demand and the need to be innovative and competitive, than
to protect the quality of higher education.(1)

Cost supplementation is another feature of current
education funding, whereby grants are adjusted to cover increased costs.
This Bill appropriates funds for 1999 and 2000, and provides supplementation
for price movements and additional superannuation expenses incurred
by institutions in 1998.

The Commonwealth funds institutions for a maximum
number of student places. The level of Commonwealth funding is
negotiated between the universities and the Department of Employment,
Education, Training and Youth Affairs (DEETYA). This framework
for financing higher education was criticised in the Final Report of
the West Committee’s Review of Higher Education Financing and Policy which was published
in April 1998. Under the heading ‘The Way Forward’ the Committee
stated that:

Instead of the perverse incentive structures, inflexibility,
restrictions on competition and entry into the market, and the poor
access of Australian institutions to finance, we need a financing and
regulatory framework that:

responds to students’ preferences about study options and the location,
conte nt and mode of delivery of education, and provides high
quality learning experiences which meet the particular needs of individual
learners;

â¢ protects students and taxpayers and is accountable to students
and taxpayers for the investment that they make in higher education;

â¢ facilitates effective
investment by the Government in research and research training; and

â¢ enables Australian
universities to become major players in a world-class education
industry that can play a direct role in driving the growth of our economy.

â¢ Our conclusion is that fundamental reform is needed in the funding
of teaching and research and in the way that government supports higher
education as an industry.(2)

The Committee recommended a funding model where the number of students
for which a uni versity receives funding would be determined directly
by student choice, rather than by negotiations between universities
and DEETYA. In public comment which followed the release of the
Committee’s Discussion Paper the model of student centred funding
was referred to as ‘vouchers’.

Although the Government has yet to make its formal
response to the West Committee’s report, the Minister for Employment,
Education, Training and Youth Affairs, Hon Dr David Kemp MP, said in
a Press release dated 12 November 1997 that ‘the Federal Government
had no intention of introducing a voucher system for universities’.(3)

Current Levels of Funding

The major decisions for funding higher education for the current three
year period were announced in the 1996-97 Budget. This re duced
the forward estimates for higher education operating grants by 1 per
cent in 1997, by a further 3 per cent in 1998 and a further 1 per cent
in each of 1999 and 2000. The maximum grants for general teaching
and research purposes will decline in 1999 and 2000 as follows:

In addition to operating grants, the total revenue available to higher
education institutions includes students’ contributions through the
Higher Education Contribution Scheme (HECS), revenue from fee-paying
studen ts, capital grants, and funds from research and development,
investment earnings, donations and bequests. In 1997, the total
revenue available to higher education institutions from all sources
was estimated to be $8.4 billion. This is forecast to increase
to $8.6 billion in 2000.(4) Higher education programs are described
in detail in the Department of Employment, Education, Training and Youth
Affairs publication, Higher Education Funding Report for the 1998-2000 Triennium ,
published in December 1997.

Overseas students

The Commonwealth
has been encouraging universities to develop full fee services for overseas
students since 1985, when a full fee program was introduced alongside
a limited program for part-subsidised overseas students. The former
Government’s view was that overseas student services should be treated
as an education export, except where scholarships would advance government
aid or international objectives.(5)

The total
number of overseas students in Australia has grown from around 21,000
in 1988 to 140,000 in 1996. In 1996 it was estimated that international
students contributed over $3 billion to the Australian economy, an increase
of nearly 50 per cent in just two years.(6) The Government estimates
that the total number of overseas students studying in Australia is
expected to rise from 151,464 in 1997 to 181,000 in 2001 - a 19.5%
increase. This is expected to increase total revenue from overseas
students by 39%, from $3.22 billion in 1997 to $4.49 billion in 2001.
(7)

The Australian Inter national Education Foundation (AIEF) was
established in 1994 as a government-industry partnership. Its
role was, in part:

â¢ to establish
a broad range of Australian international education, training and research
activities and

â¢ to develop
a marketing s trategy to enhance the perception of Australia as
a major contributor to and provider of high quality education, training
and research internationally.

The AIEF was financed through a Trust Fund. Contributions to
the Trust Fund were initially on a 2:1 gov ernment to industry
basis. This was reduced in the 1996-97 Budget to 1:1 for the two
years 1996-7 and 1997-8, and the Government allocated $3 million for
each of the two years. The Government also foreshadowed withdrawing
all funding from the program by 2000-01.(8) The universities were dissatisfied
with the AIEF and in 1997 most did not pay their full subscriptions
to the Trust Fund.(9)

In 1996 the Allen Consulting Group was commissioned by DEETYA to review
the role of the AIEF and to provide an assessment of the appropriate
roles for government and the education and training industry in facilitating
further growth in education and traini ng exports. The review
was completed in 1997.(10)

On 11 May 1998, the Minister for Employment, Education,
Training and Youth Affairs, Hon Dr David Kemp MP, announced that the
Government would provide $21 million over the next four years for an
international marketing campaign to promote Australia’s education
and training services overseas.(11) The amounts in this Bill total $7.367
million for three years 1998-2000. According to press reports
the $21 million does not represent net extra spending - it has been
taken from other higher education areas, including the Australian National
Training Authority national project funds.(12)

Dr Kemp also announced that the marketing campaign would focus on
traditional Asian markets as well as relatively untapped student
markets such as India, China, Europe and North and South America.
It would help to minimise the impact of the Asian economic crisis on
the number of overseas students studying in Australia.(13)

At the same time Dr Kemp said that the AEIF would
be renamed Australian Education International (AEI). It would
be more fully integrated with the operations of DEETYA and wholly funded
by government. Its role would be to act as a link between the
overseas promotion of Australian education and training and the broader
Government objectives for foreign affairs and trade.(14)

Main
Provisions

Amendments to the Higher Education Funding Act 1988

Item 1 of Schedule 1 changes the heading of Chapter 2 of the
Act from ‘States Grants for Higher Education Assistance’ to ‘Grants
for Higher Education Assistance’.

Item 2 amends Section 17 of the Act which sets the maximum
level of funding grants payable to higher education institutions for
operating purposes in a given year. Operating purposes is defined
in section 3 and includes the general teaching purposes and general
research purposes of the institution, the provision of courses of continuing
education, and the purchase of equipment and minor building projects
associated with general teaching and research purposes. The proposed
amendment reduces the maximum level of grants payable in 1998 by $1
million from $3,860 million to $3,859 million, and legislates amounts
of $3,260 million for 1999 and $3,120.5 million in 2000.

Item 3 amends Section 20 of the Act which provides for grants
to institutions for superannuation expenses. The amendment increases
the maximum amount payable for 1998 by over $5 million from $103.6 million
to $108.7 million, and inserts amounts of $112.7 million in 1999 and
$116.3 million in 2000.

Item 4 deals with grants to open learning institutions and
ceilings on those grants. A maximum amount of $221,000 is proposed
for each of 1999 and 2000, compared with $218,000 in 1998.

Item 5 amends Section 23C of the Act which operates to limit
the amount payable for an aggregated group of grants. The section
caps the total cost of grants made under the following categories: national
priority, innovation, promotion of equality of opportunity, special
research assistance, advanced engineering centres, and co-operative
multimedia centres. An additional $6 million is available in 1998,
up from $475 million. A consolidated amount of $466.5 million
is prescribed in 1999 and $395 million in 2000.

Item 6 amends Section 24 of the Act which provides for grants
payable to teaching hospitals attached to higher education institutions.
The proposed amendment increases by $1,000 the maximum amount payable
for the year 1998, and prescribes an amount of almost $5 million for
each of the years 1999 and 2000.

Item 7 amends Section 27A of the Act which provides for grants
for special capital projects. The amendment increases the maximum
amount available in 1998 by $9,000 and prescribes an amount approaching
$39 million for each of 1999 and 2000.

Item 8 deals with expenditure on the international marketing
and promotion of education and training services provided by Australian
institutions. The proposed amendment is inserted in Section 27
which enables the Minister to issue guidelines relating to expenditure
on special purpose projects. The proposed new section 27D allows the Minister to determine the
maximum amount payable by the Commonwealth for the international promotion
of Australian education and training services. In 1998 this amount
is to be $1.016 million, increasing to $2.468 million in 1999 and to
$3.883 million in 2000.

The amendment proposed by Item 9 has the effect of providing for the Minister to table
in each House of Parliament, determinations of the maximum amounts payable
by the Commonwealth for international promotion of Australian education
and training services.

Amendments relating to James Cook University

On 1 January 1998 the name of the University changed
from ‘James Cook University of North Queensland’ to the ‘James
Cook University’. The University is established by an Act of
the Queensland Parliament and the name change was part of the James Cook University Act 1997 (Qld) which commenced on 1 January
1998.(15) This Bill amends the Employment, Education and Training Act 1988 ( Item 1 ) and the Higher Education Funding Act 1988 ( Item 2 ) to reflect the change in the University’s name.

5. The Australian International
Education Foundation: Review of the government-industry partnership,
consultancy report to the Department of Employment, Education, Training
and Youth Affairs by the Allen Consulting Group Pty Ltd, March 1997,
12.

14. James Cook
University of North Queensland, Annual report 1997: the year in review , Townsville, 1998, 60.

Contact Officer

Rosemary Bell

30 20 August 1998

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